Will GM Ever Repay Taxpayers?

Earlier this week, the U.S. Treasury Department disclosed�that it had raised $489.9 million from the sale of General Motors (NYSE: GM  ) shares in February.

The Feds didn't disclose exactly how many shares they had sold, but given GM's share prices in February, it's a considerable number � at least 17 million shares, possibly 18 million or a bit more.

Clearly, the government is serious about its plan to exit GM, announced last December. And while that seems like good news for the General, it could create some interesting complications.

Will the Feds ever recoup their "investment" in GM?
Back in December, Treasury agreed to a deal in which it would sell 200 million of its remaining 500 million shares of General Motors directly to GM, in exchange for $5.5 billion � and would sell its remaining shares gradually, on the open market, over the following 15 months or so.

That deal left the Feds with 300 million shares. Those shares are the last major legacy of GM's controversial 2009 "bailout", in which the government took a stake in GM in exchange for financing the battered auto giant's high-speed restructuring via bankruptcy.

The financing provided by the Treasury for GM's restructuring � its "investment" in GM, as it has been termed on occasion�� totaled some $49.5 billion. Of that, GM has now "repaid" � directly or indirectly � a bit less than $30 billion:

• $6.7 billion in cash, the last of which was paid in April of 2010 (when then-CEO Ed Whitacre declared that GM's debt had been "paid in full")
• $13 billion via GM's IPO, when the government sold about 45% of its stock holdings
• $2.1 billion when GM bought back some preferred stock from the Treasury in late 2010
• $5.5 billion when GM bought back those 200 million shares from the Treasury in December of 2012
• $646.3 million in sales of GM stock by the Treasury in January and February of 2013
• The remainder in interest and dividends on loans and preferred stock.

That leaves the Treasury short about $20 billion � and with something like 277 million shares left to sell. The math on that doesn't work out well for taxpayers: The Feds need to get something like $72 a share in order to break even on their "investment".

GM is trading at a bit over $28 as I write this on Thursday. Clearly, the Feds aren't likely to recoup their money any time soon � at least, not by selling their remaining GM stock.

How is that going to work out for GM?

The "Government Motors" stigma still isn't fading
It has been nearly four years since GM emerged from bankruptcy, but the hard feelings over GM's taxpayer-funded bailout haven't yet faded. I hear it from readers all the time: GM will never again compete with old rival Ford (NYSE: F  ) in their eyes, because Ford was able to finance its own turnaround without government intervention.

That's certainly true, and it doesn't help that Ford's turnaround has been a shining success while GM continues to muddle through what seems like a never-ending overhaul.

So how can GM get past the "Government Motors" stigma? Making consistently great cars and trucks (like � I hate to say it � Ford is doing) would certainly help, and although GM's progress on that front hasn't been unequivocal, GM's best recent products really are excellent. With a slew of new models on the way over the next couple of years, GM should � should � be able to regain more of its former customers.

But I think GM will need to do more to bring its "Government Motors" chapter to a close.

Will GM step up and really pay taxpayers back?
At current prices, the Treasury's remaining shares are worth a bit less than $8 billion � a long way from the $20 billion that remains unpaid from the bailout.

The Treasury is expected to have sold the last of its GM shares about a year from now, in March of 2014. At that point, GM's remaining "debt" to taxpayers could become a big issue, a PR thorn in GM's side.

GM had $26.1 billion in cash on hand at the end�of 2012. Writing a big check to the Treasury to square accounts once and for all would put a sizable dent in that cash hoard � but it could end up being the right thing to do to help restore GM's reputation. Will GM CEO Dan Akerson decide to go there? Stay tuned.

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